Wiley Accounting
Weekly Updates

Discussion Topics for Today's Classroom

Canada’s corporate income tax fight

To Lower or not to Lower Corporate Tax Rates? Let us look at a few conflicting arguments. We are presently in the mist of a Federal Election, and all the major parties have different arguments to increase or decrease taxes.

All three parties basically seem to get the notion of corporate competitiveness and the link to job creation. The Conservatives, Liberals and the New Democratic Party differ as to where Canadian companies fit in the international landscape and whether chopping what these firms pay to Ottawa is the best way to create jobs. Of course, some of these variations are the result of political calculations by the federal parties, designed to position themselves to get the most votes.

The battle is joined

Some like the notion of chopping what firms pay.

“The recent and planned general corporate rate reductions are good for the economy with a minimal impact on government revenues,” Jack Mintz, Palmer Chair of Public Policy, School of Public Policy at the University of Calgary, wrote in a recent opinion piece in the National Post.

Waving the low-tax flag

At first blush, the case for knocking down company taxes would appear to be fairly straightforward.

“To increase after-tax cash flow — leave more money in the hands of business to invest,” noted Jeff Brownlee, vice-president of public affairs and partnerships for the Canadian Manufacturers and Exporters, an Ottawa-based business group.

Simply put, if a company has more cash on hand, it can buy more performance-enhancing machinery or hire new workers.

Conversely, if the government takes away that money, public officials are more likely to waste at least some of those tax dollars on inefficient projects, losing the maximum benefit the money could have on the overall economy.

Hiking profitability

Increasing corporate taxes may cause corporations to move to other countries that offer lower taxes and thus lose jobs in the process. The higher cost of paying taxes, may cause corporations to pass on the increase cost to consumers.